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Trustees of the Masonic Hall and Asylum Fund v. Leavitt

June 7, 2006

THE TRUSTEES OF THE MASONIC HALL AND ASYLUM FUND, PLAINTIFFS,
v.
MIKE LEAVITT*FN1, AS SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, JOHN PLUMLEY, INDIVIDUALLY AND AS COUNTY EXECUTIVE OF ONEIDA COUNTY, MICHAEL J. NASSAR, INDIVIDUALLY AND AS COMMISSIONER OF SOCIAL SERVICES OF ONEIDA COUNTY, ONEIDA COUNTY, A MUNICIPAL CORPORATION, AND CESAR PERALES, INDIVIDUALLY AND AS COMMISSIONER OF SOCIAL SERVICES OF THE STATE OF NEW YORK, DEFENDANTS,
THE TRUSTEES OF THE MASONIC HALL AND ASYLUM FUND, PLAINTIFFS,
v.
JOHN PLUMLEY, INDIVIDUALLY AND AS COUNTY EXECUTIVE OF ONEIDA COUNTY, MICHAEL J. NASSAR, INDIVIDUALLY AND AS COMMISSIONER OF SOCIAL SERVICES OF ONEIDA COUNTY, ONEIDA COUNTY, A MUNICIPAL CORPORATION, CESAR PERALES, INDIVIDUALLY AND AS COMMISSIONER OF SOCIAL SERVICES OF THE STATE OFNEW YORK, AND MIKE LEAVITT*FN2, AS SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES. DEFENDANTS.



The opinion of the court was delivered by: Howard G. Munson Senior United States District Judge

MEMORANDUM - DECISION AND ORDER

INTRODUCTION

This matter is composed of two actions: The Trustees of the Masonic Hall and Asylum Fund v. Leavitt, et al, 84-CV-991, and The Trustees of the Masonic Hall and Asylum Fund v. Plumley, et al, 84-CV-992.*fn3 Plaintiffs commenced both actions on July 17, 1984. Although the two cases were never consolidated, because both actions arose from the same set of facts and circumstances, they have become permanently affiliated and essentially interchangeable. In fact, Plaintiffs simultaneously filed amended complaints against the same federal, state, and county Defendants. Consequently, the Court examines both actions and the motions now stemming therefrom coincidentally.

Presently before the Court are Defendants' unopposed*fn4 motions: the Secretary of the Department of Health and Human Services' motion to dismiss Plaintiffs' amended complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted pursuant to Rules 12(b)(1) and (b)(6) of the Federal Rules of Civil Procedure, see 84-CV-991, Dkt. No. 107, Notice of Mot.;Cesar A. Perales' motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, see 84-CV-992, Dkt. No. 107, Notice of Mot.;Oneida County's, John Plumley's, and Michael J. Nassar's motions for partial judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, see 84-CV-992, Dkt. No. 110, Notice of Mot., and for an order compelling Plaintiffs to answer certain interrogatories and produce certain documents pursuant to Rule 37(a) of the Federal Rules of Civil Procedure. See 84-CV-992, Dkt. No. 112, Notice of Mot.

BACKGROUND

I. The Parties and the Procedural History

Plaintiffs, the Trustees of the Masonic Hall and Asylum Fund, are the governing body of the Masonic Hall and Asylum Fund, a fraternal nonprofit organization that operates the Masonic Home, a 388 bed nursing home located in Utica, New York. The Plaintiffs' nursing home, which is certified as a Medicaid provider by the New York State Department of Social Services, attracts patients not only from Oneida County, where it is situated, but also from other counties throughout New York State and other states throughout the United States. On July 18, 1984, Plaintiffs filed complaints against the Secretary of the United States Department of Health and Human Services, Margaret M. Heckler (the "Secretary" or "Federal Defendant"), John Plumley, Executive for Oneida County, Michael J. Nassar, Commissioner of Social Services of Oneida County, Oneida County, (collectively, the "County Defendants") and Cesar Perales, Commissioner of Social Services of the State of New York, (the "State Defendant") seeking declaratory and injunctive relief, compensatory and punitive damages, and remedial fines. With Defendants' consent, Plaintiffs subsequently amended both complaints in December 1984. As to Secretary Leavitt, Plaintiffs seeks declaratory and permanent injunctive relief, or more specifically, an affirmative injunction or mandamus. Plaintiffs asks the Court to direct Secretary Leavitt to investigate the practices of New York State and Oneida County, report to the Court the results of such investigation as well as any decision not to withhold federal monies from New York State, and to promulgate various regulations. See 84-CV-991, Am. Compl., Ad Damnum Clause, ¶ I. As to the County and State Defendants, Plaintiffs seeks: (1) a declaration that their conduct violates federal and state law; (2) an injunction against the continuation of such alleged illegal conduct, requiring payment of pending and future applications of Medicaid-eligible residents of Plaintiffs and Medicaid benefits to residents who are entitled to same pursuant to fair hearings and/or stipulations, see 84-CV-992, Am. Compl. at ¶ 45; (3) remedial fines to assure compliance, see 84-CV-992, Am. Compl at ¶ 62; and, (4) compensatory damages, see 84-CV-992, Am. Compl. at ¶ 56. In addition, as to the County Defendants, Plaintiffs seeks punitive damages. See 84-CV-992 Am. Compl. at ¶ 60.

The Federal Defendant moved to dismiss the amended complaints in both actions, and the Court denied these motions from the bench on December 9, 1985. See 84-CV-992, Dkt. No. 90, Pl.'s Mem. of Law in Opp'n at 3. From approximately May 1986, through the present, the parties have engaged in protracted, but ultimately unsuccessful, settlement negotiations. Additional claims and various motions, however, punctuated the settlement negotiations. The County Defendants subsequently amended their answers so as to assert counterclaims, which the Court dismissed by Memorandum-Decision and Order dated July 27, 1988. See Trustees of the Masonic Hall and Asylum Fund v. Plumley, 1988 WL 79205 (N.D.N.Y. July 27, 1988). In June of 1989, the State Defendants moved to dismiss, and the County Defendants moved for partial summary judgment; in August of 1989, the Federal and County Defendants moved to compel Plaintiffs to answer interrogatories and produce certain documents; and, in December 1998, the Federal, State and County Defendants withdrew all of the then-pending motions. The Federal, State, and County Defendants, however, have essentially renewed their previously withdrawn motions.

In March of 1999, the State Defendant moved pursuant to Rule 12(c) of the Federal Rules of Civil Procedure for judgment on the pleadings and to dismiss Plaintiffs's action in its entirety while the County Defendants moved pursuant to Rule 12(c) of the Federal Rules of Civil Procedure for partial judgment on the pleadings and to dismiss Plaintiffs's action in its entirety. In June 1999, the Federal Defendant followed suit and moved pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure to dismiss Plaintiffs's amended complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted.

II. The Parties' Dispute

The Masonic Home was enrolled as a Medicaid provider in 1975. At the time Plaintiffs filed their amended complaint, the Masonic Home was providing services to approximately 309 Medicaid eligible residents. The Masonic Home's practice was to apply for Medicaid benefits on behalf of residents when their own resources had been exhausted and to continue to provide services, subject to reimbursement, while the application was pending. Plaintiffs allege generally that from 1975 until the filing of their amended complaint, they submitted numerous applications for Medicaid on behalf of their residents, and that the County Defendants denied many of these applications on frivolous grounds. Plaintiffs further allege that the County Defendants failed to comply with adverse fair hearing decisions, with their own stipulated agreements to accept applications, and with 18 NYCRR § 311.3(c)(1) governing the payment of benefits pending inter-district jurisdictional disputes. Plaintiffs allege that Defendants wrongfully denied and/or delayed granting Medicaid benefits to certain residents who came to the facility from out of state. This action presents a challenge to the alleged failure of New York State and Oneida County to provide certain Medicaid payments to persons who moved from out of the state into residential health care facilities maintained by Plaintiffs.

DISCUSSION

I. Standards of Review

A. Subject Matter Jurisdiction

Challenges to subject matter jurisdiction pursuant to Rule 12(b)(1) may contest "either the facial sufficiency of the pleadings in the complaint or the existence of subject matter jurisdiction in fact." Dow Jones & Co. v. Harrods, Ltd., 237 F.Supp.2d 394, 404 (S.D.N.Y. 2002), aff'd, 346 F.3d 357 (2d Cir. 2003). As in a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), "[i]n a facial challenge, the [C]ourt accepts as true the uncontroverted factual allegations in the complaint." Id.; see also Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998). "Under [Rule 12(b)(1) ], the court must accept all factual allegations in the complaint as true and draw inferences from those allegations in the light most favorable to the Plaintiffs." The Second Circuit, however, has also held that the district court need not--indeed, must not--accept all allegations in the complaint as true. See Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir.1998) ("[I]t was error for the district court to accept the mere allegations of the complaint as a basis for finding subject matter jurisdiction . . . . Our rule is that, on a challenge to the district court's subject matter jurisdiction, the court may resolve disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits.") (quotations omitted). The preliminary showing that must be made by the Plaintiffs is not meant to be overly burdensome, "allowing for subject matter jurisdiction so long as 'the federal claim is colorable.'" Cromer Fin. Ltd. v. Berger, 137 F.Supp.2d 452, 467 (S.D.N.Y. 2001) (quoting Savoie v. Merchants Bank, 84 F.3d 52, 57 (2d Cir. 1996)). "In a close case, the factual basis for a court's subject matter jurisdiction may remain an issue through trial, and, if and when doubts are resolved against jurisdiction, warrant dismissal at that time." Europe & Overseas Commodity Traders, S.A. v. Banque Paribas London, 147 F.3d 118, 121 n. 1 (2d Cir.1998) (citation omitted).

B. Failure to State a Claim

Pursuant to the liberal pleading requirements of the Federal Rules of Civil Procedure, Plaintiffs need only provide "a short and plain statement of the claim showing that the pleader is entitled to relief." FED.R.CIV.P. 8(a)(2). Accordingly, dismissal of a complaint for failure to state a claim pursuant to Rule 12(b)(6) is proper only where "it appears beyond doubt that the Plaintiffs can prove no set of facts in support of his claim which would entitle him to relief." Harris v. City of New York, 186 F.3d 243, 247 (2d Cir.1999). In making this determination, a court must accept all factual assertions in the complaint as true and draw all reasonable inferences in favor of the Plaintiffs. See Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997).

In deciding a motion to dismiss, a court may review documents integral to the complaint upon which the Plaintiffs relied in drafting the pleadings, as well as "any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000) (citing Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989)); see also Schnall v. Marine Midland Bank, 225 F.3d 263, 266 (2d Cir. 2000).

C. Judgment On The Pleadings "The standard for granting a Rule 12(c) motion for judgment on the pleadings is identical to that of a Rule 12(b)(6) motion for failure to state a claim." Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001); see also FED.R.CIV.P. 12(h)(2) ("[a] defense of failure to state a claim upon which relief can be granted . . . may be made . . . by motion for judgment on the pleadings"). "[T]he district court must accept all allegations in the complaint as true and draw all inferences in the non- moving party's favor." Patel, 259 F.3d at 126. However, "conclusions of law or unwarranted deductions of fact are not admitted." First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir. 1994) (internal quotation and citation omitted). The motion should be granted if the court is satisfied that the complaint cannot state any set of facts that would entitle the Plaintiffs to relief. Patel, 259 F.3d at 126.

In deciding such a motion, a court may consider, in addition to the factual allegations of the complaint, "documents that the Plaintiffss either possessed or knew about and upon which they relied in bringing the suit." Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000); see also Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991) (even though they were not attached to complaint or incorporated by reference, the court could consider stock purchase agreement, offering memorandum, and warrant on motion to dismiss because Plaintiffs had documents either in their possession or had knowledge of them and relied upon them in bringing suit); Citadel Mgmt. Inc. v. Telesis Trust, Inc., 123 F.Supp.2d 133, 147 n. 3 (S.D.N.Y. 2000) (although Plaintiffs could not submit materials that were not attached or incorporated in complaint in opposing motion, "the contract submitted by the defendants in support of the motion to dismiss may be considered, as Citadel had notice of the document's existence and in fact relied on it in the Amended Complaint").

II. The Federal Defendant--Secretary of Health and Human Services

A. Subject Matter Jurisdiction

1. 28 U.S.C. § 1361

Although Plaintiffs has framed its claim for relief against the federal government in terms of injunctive relief, the Court reads the claim to seek a writ of mandamus directing the Secretary to investigate the State and County's administration of their respective Medicaid programs, and, if necessary, declare them non-compliant with federal law. The Secretary argues that the United States has not consented to relief Plaintiffs seeks.

Title 28 U.S.C. § 1361 provides that: "The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the Plaintiffs." Section 1361, however, "only provides an additional remedy where jurisdiction already exists." Natural Resources Defense Council, Inc. v. Thomas, 689 F.Supp. 246, 259-60 (S.D.N.Y. 1988); see also Doe v. Civeletti, 635 F.2d 88, 94 (2d Cir. 1980) (explaining that § 1361 is not an all-purpose waiver of the Government's immunity from suit). Thus, § 1361 does not constitute a waiver of sovereign immunity by the United States. Courts have held that § 1361 does not by itself operate as a waiver of sovereign immunity. See, e.g., Washington Legal Found. v. U.S. Sentencing Comm'n, 89 F.3d 897, 901 (D.C.Cir. 1996) ("It is well settled that this statute does not by itself waive sovereign immunity.") (citing cases); Lonsdale v. United States, 919 F.2d 1440, 1444 (10th Cir.1990) ("Sovereign immunity is not waived by general jurisdictional statutes such as . . . 28 U.S.C. § 1361."); Coggeshall Dev. Corp. v. Diamond, 884 F.2d 1, 3 (1st Cir. 1989) ("The provisions of 28 U.S.C. § 1361 creating the federal mandamus action do not constitute a waiver of sovereign immunity by the United States."); Smith v. Grimm, 534 F.2d 1346, 1352 n. 9 (9th Cir. 1976) ("We . . . note the bar of sovereign immunity as an additional impediment to Plaintiffs's allegation of mandamus jurisdiction. [Section 1361] is not a consent to suit by the sovereign.") (citation omitted); but see Drake v. Panama Canal Comm'n, 907 F.2d 532, 534 (5th Cir. 1990) ("[T]he mandamus statute . . . waives, for some purposes, the sovereign immunity of the United States.") (quotations and citations omitted). However, "[i]f a Plaintiffs seeks a writ of mandamus to force a public official to perform a duty imposed upon him in his official capacity[, under the so-called Larson-Dugan exception to sovereign immunity,] no separate waiver of sovereign immunity is needed." Washington Legal Found., 89 F.3d at 901. The Supreme Court has explained:

There may be, of course, suits for specific relief against officers of the sovereign which are not suits against the sovereign . . . [W]here the officer's powers are limited by statute, his actions beyond those limitations are considered individual and not sovereign actions. The officer is not doing the business which the sovereign has empowered him to do or he is doing it in a way which the sovereign has forbidden.

His actions are ultra vires his authority and therefore may be made the object of specific relief.

Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 689, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949).

"Section 1361 'is intended to provide a remedy for a Plaintiffs only if he has exhausted all other avenues of relief and only if the defendant owes him a clear nondiscretionary duty.'" Franchi v. Manbeck, 972 F.2d 1283, 1289 (Fed.Cir.1992) (quoting Heckler v. Ringer, 466 U.S. 602, 616, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)). Accordingly, mandamus is not granted lightly--it "is a drastic remedy available only in extraordinary situations." Morelli v. Alexander, 920 F.Supp. 556, 558 (S.D.N.Y. 1996). A Plaintiffs seeking mandamus relief must demonstrate the following: "(1) [he] has a clear right to the relief sought, (2) ...


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